Project Gravity: Traeger's Fight for Survival in the Tariff Crosshairs (NYSE:COOK) - COOK Stock Research Report

## Executive Summary / Key Takeaways * Project Gravity represents Traeger's existential pivot from growth-at-all-costs to profitability-focused survival, targeting $50 million in run-rate savings by 2026 through channel exits and operational streamlining that will sacrifice $60 million in near-term revenue to save a business facing 145% tariffs on key products. * Tariffs are not just a margin headwind but a strategic forcing function, compelling Traeger to accelerate Vietnam diversification and rationalize its bloated cost structure, with Q3 2025 showing the damage: $8 million in direct tariff costs created 670 basis points of unfavorability, partially offset by pricing actions (170 bps), supply chain efficiencies (90 bps), and improved pellet margins (30 bps), resulting in a net negative impact of approximately 380 basis points on gross margin, which declined to 38.7%. Management claims they can offset 80% of the $60 million annual exposure. * The consumables flywheel is the only stable engine in Traeger's business, delivering 12.3% growth in Q3 2025 and expanding distribution into Walmart (TICKER:WMT), while the core grill business stagnates and the MEATER acquisition has become a $74.7 million goodwill impairment disaster, with its revenue down 15.3% year-to-date. * Liquidity is adequate but tightening, with $167 million in available credit and no current revolver draw providing runway through 2026, yet the stock's $0.91 price and NYSE delisting notice signal market skepticism about whether operational improvements can outpace margin compression and $403 million in term loan debt. * The investment thesis hinges on two binary outcomes: successful execution of China-to-Vietnam production shift by end of 2026, and whether Traeger's premium brand equity can withstand price increases that have already driven high-single-digit grill volume declines while competitors like Pit Boss capture value-conscious consumers. ## Setting the Scene: A Category Leader Under Siege Traeger, Inc., founded in 1987 and headquartered in Salt Lake City, invented the wood pellet grill category and built a premium brand synonymous with wood-fired flavor and WiFIRE-connected convenience. The business model is elegantly simple: sell high-margin hardware (grills ranging from $499 to $1,599), then capture recurring revenue through proprietary wood pellets, rubs, and accessories while building community through the Traegerhood content ecosystem. This flywheel—grill sales driving consumables attachment—has historically delivered superior lifetime value and a highly evangelical customer base with industry-leading NPS scores. But today's Traeger bears little resemblance to the pandemic-era growth story. The post-2022 consumer discretionary collapse exposed structural fragilities: 80% of grill production concentrated in China, a direct-to-consumer channel bleeding cash, and a $100 million MEATER acquisition that management now admits faces "heightened competition" from $250 thermometers. The macro environment has turned brutal—higher interest rates have crushed financing for big-ticket purchases, housing turnover sits at all-time lows, and the "elusive replacement cycle" for pandemic-era grill buyers remains just that: elusive. Industry dynamics compound the pain. Pit Boss, owned by private Dansons Inc., has captured the value segment with grills often half Traeger's price and similar WiFi connectivity. Camp Chef (Middleby's (TICKER:MIDD) residential segment) offers superior searing capabilities at competitive prices. The broader outdoor cooking market has shifted toward flat-top griddles (Blackstone) and gas grills, while pellet growth has slowed to mid-single digits. Traeger's 3.6% household penetration suggests room for expansion, but only if the company can make its premium positioning accessible—a tension that pricing strategy has yet to resolve. The tariff war delivered the coup de grâce. With 50% of sales tied to Chinese imports, Traeger faces a 25% Section 232 steel tariff plus 20% IEEPA tariffs on Chinese goods, with some accessories hitting 145%. This isn't a temporary margin squeeze; it's a structural cost disadvantage that threatens the entire business model. The market has rendered its verdict: the stock trades at $0.91, down from post-IPO highs, triggering a NYSE delisting notice for failing to maintain the $1.00 minimum. This is the context in which management launched Project Gravity—not as optimization, but as emergency surgery. ## Technology, Products, and Strategic Differentiation: Woodridge vs. The Tariff Wall The Woodridge series launch in January 2025 represents Traeger's most important product cycle in nearly 40 years. Management calls it "the best product this company has built," and early data supports the claim: 4.8-star average ratings, strong consumer reception, and demand outperforming expectations despite price increases. This matters because Woodridge proves Traeger's brand equity remains intact even as prices rise to offset tariffs. The product delivers more cooking space, an easy-clean grease and ash keg, and a free-flow firepot for enhanced smoke—all at accessible price points from $799 to $1,599. This is Traeger's answer to the value challenge: innovate to justify premium pricing. The technology story extends beyond hardware. WiFIRE connectivity and the Traeger app create genuine switching costs. Once a consumer learns to program, monitor, and control cooks remotely while accessing the Traegerhood recipe library, moving to a Pit Boss means abandoning that ecosystem. This matters for the investment thesis because it suggests Traeger's premium can be defended through software and content, not just metal and powder coating. The company is doubling down, planning to shift traeger.com from a money-losing DTC channel to a content-only platform that drives traffic to retail partners, capturing value through brand engagement rather than fulfillment costs. Yet the MEATER acquisition reveals the limits of this strategy. The $74.7 million goodwill impairment in Q3 2025 is management's admission that the smart thermometer category has become commoditized by low-price entrants. MEATER revenues declined 15.3% year-to-date despite Traeger-branded accessories growing double-digits. MEATER's $99-$249 price points face Amazon (TICKER:AMZN) competitors at $30, and the product lacks the ecosystem lock-in of grills. Management's response—integrating MEATER into Salt Lake City operations, cutting UK headcount, and shifting to wholesale channels—may stem losses but won't recreate the grill flywheel. This implies Traeger's brand equity doesn't automatically extend beyond its core category. Supply chain diversification is the most critical technology decision. Management commits to producing "all new grill SKUs going forward in Vietnam" and "materially diversifying production out of China by end of fiscal 2026." This matters because it directly addresses the 145% tariff exposure while reducing geopolitical risk. The company already produces 25% of grills in Vietnam and has "multiple suppliers at some phase in development through mass production." However, the timeline is concerning: "materially diversifying" by end of 2026 means approximately 15 more months of tariff vulnerability. The risk is that competitors already manufacturing in Vietnam (or domestically) gain permanent cost advantages while Traeger plays catch-up. ## Financial Performance & Segment Dynamics: Margin Compression Meets Cost Reckoning Traeger's Q3 2025 results tell a story of managed decline amid crisis. Revenue grew 2.7% to $125.4 million, beating expectations but masking severe underlying pressure. The gross margin collapse from 42.3% to 38.7%—a 360 basis point year-over-year decline—represents the tariff impact in stark terms. Management quantified the damage: $8 million in direct tariff costs created 670 basis points of unfavorability, only partially offset by pricing actions (170 bps), supply chain efficiencies (90 bps), and improved pellet margins (30 bps). This matters because it shows tariffs are overwhelming operational improvements, and pricing power has limits.

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The segment breakdown reveals where Traeger is winning and losing. Grills, at 61% of revenue, grew 2.2% in Q3 but only through a low-double-digit increase in average selling price offsetting a high-single-digit volume decline. This is the elasticity trap: price increases protect near-term revenue but shrink the addressable market. For the nine-month period, grill revenue is down 3.8% year-over-year, with unit volume continuing to decline despite the Woodridge launch. The implication is that Traeger is trading volume for price, which may preserve margins temporarily but threatens long-term market share.

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Consumables are the bright spot, growing 12.3% in Q3 and 3.7% year-to-date, driven by mid-double-digit wood pellet sales increases. This matters because consumables carry higher margins, are domestically sourced (no tariffs), and represent recurring revenue from the installed base. The Walmart rollout in January 2025 is incremental—consumer research showed Traeger shoppers buy pellets where they grocery shop, and Walmart represents a massive new channel. With 25% full-year 2024 growth and continued expansion, consumables provide the cash flow stability that hardware cannot. Accessories are a disaster. The category declined 4.3% in Q3 and 15.3% year-to-date, entirely due to MEATER's collapse. Traeger-branded accessories grew double-digits, proving the core brand remains strong, but MEATER's $100 million purchase price now looks like a strategic misstep. The $74.7 million goodwill impairment is management's acknowledgment that the acquisition thesis was wrong. This matters because it raises questions about capital allocation discipline and whether management can successfully extend the brand beyond grills.

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Project Gravity's financial impact is the critical variable. Phase 1 targets $30 million in run-rate savings through headcount reductions and MEATER integration, with $13 million realized in fiscal 2025. Phase 2 adds $20 million more through channel exits (Costco (TICKER:COST) roadshows, DTC shutdown, European distributor model) but sacrifices $60 million in revenue. The net effect is a smaller, more profitable business—management explicitly states the goal is "transforming into a leaner, more efficient and more profitable business, albeit with a smaller base of revenues in the short term." This matters because it signals a permanent strategic shift from growth to profitability, which may be necessary for survival but caps the long-term revenue opportunity. The balance sheet provides limited cushion. As of Q3 2025, Traeger had $5.9 million in cash, $403.4 million in term loan debt, and $167 million in total liquidity (including undrawn revolver and receivables facility). Net cash from operations was just $5.0 million for the nine-month period, down from $16.4 million prior year. The company is prioritizing debt paydown to achieve its "long-term goal for leverage at or below three turns," but with negative net income and margin pressure, free cash flow generation is tenuous. The inventory build to $115 million (up from $107 million year-end) reflects tariff-driven cost inflation and the shift from direct import to domestic fulfillment, tying up working capital when liquidity is scarce.

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## Outlook, Management Guidance, and Execution Risk Management's guidance for fiscal 2025—revenue of $540-555 million (down 8-11% year-over-year) and adjusted EBITDA of $66-73 million—embodies the Project Gravity trade-off. This represents a dramatic reversal from the initial $595-615 million guidance provided in Q4 2024, which was withdrawn in Q1 due to tariff uncertainty before being reinstated at lower levels. The implied EBITDA margin of 12-13% is achievable only if cost savings materialize as promised. This matters because it shows management is willing to guide down revenue to preserve credibility, but the market still trades the stock at crisis levels, suggesting skepticism about execution. The guidance assumptions reveal management's core thesis: grill revenues will be "down high single digits for the year" due to pricing elasticity, consumables will grow, and accessories will remain under pressure. This matters because it confirms Traeger is sacrificing unit volume for price, a strategy that only works if the brand can sustain premium positioning. The risk is that Pit Boss and Camp Chef capture displaced customers permanently, making any future volume recovery impossible. Execution risk is concentrated in three areas. First, the Vietnam diversification timeline—"materialally diversifying production out of China by end of fiscal 2026"—is too slow if tariffs persist or increase. Second, the MEATER integration must not only cut costs but also stabilize revenue, which seems unlikely given category dynamics. Third, the channel optimization (exiting Costco roadshows, DTC shutdown) must recapture revenue through other channels as management promises, or the $60 million revenue loss becomes permanent market share erosion. Management commentary provides some reassurance but also raises flags. Jeremy Andrus states they can offset "about 80% of the approximate $60 million in unmitigated tariff exposure" through supply chain savings, pricing, and cost reductions. This matters because it quantifies the mitigation opportunity, but the 20% gap still represents $12 million in annual margin pressure—material for a company that generated only $48.5 million in gross profit last quarter. The admission that "we don't have redundant sourcing for all of our SKUs outside of China" highlights execution risk, while "laser-focused on taking those outside of China" suggests a reactive rather than proactive posture. The timeline for Phase 2 savings—"implementation will occur through the end of fiscal year '26" with full materialization in fiscal '27—means investors must endure at least two more years of transition before seeing the full benefit. This matters because liquidity, consumer demand, and competitive dynamics may not afford Traeger that much time. The stock's $0.91 price reflects a market pricing in significant probability of distress, not just temporary margin pressure. ## Risks and Asymmetries: When Survival Beats Growth The tariff risk is binary and existential. If the current 145% rate on Chinese accessories persists and Traeger cannot accelerate Vietnam diversification, the accessories business becomes unprofitable and may need to be shuttered. Management's statement that "we are moving those" high-volume accessories out of China is encouraging, but the pace is uncertain. The asymmetry is severe: successful diversification restores 300-400 basis points of gross margin, while failure could trigger covenant breaches on the $403 million term loan. Consumer demand risk is equally material. Management describes April and May 2025 sentiment as "pretty devastating," and while they believe a "robust replacement cycle" is coming in 2-3 years, the company must survive until then. The risk is that high interest rates and housing market stagnation have permanently reduced the addressable market for $1,000+ grills. If Traeger's price increases have alienated the sub-$1,000 segment where "the appetite for our brand beneath $500 was meaningful," the long-term growth thesis collapses. Liquidity risk is acute despite the $167 million cushion. The NYSE delisting notice received November 19, 2025, creates a 180-day countdown to regain compliance. If the stock remains below $1.00, Traeger faces a reverse split or delisting, either of which would limit financing options. The term loan matures in June 2028, but maintenance covenants could be triggered if EBITDA deteriorates further. Management's confidence that "existing cash, credit facility availability, and anticipated cash flows" provide 12 months of runway matters only if cash flows don't turn negative. Competitive risk is structural. Pit Boss's value positioning and Camp Chef's feature parity mean Traeger's premium must be justified by brand and ecosystem. The risk is that MEATER's failure proves Traeger cannot extend beyond grills, limiting TAM expansion. Meanwhile, Blackstone's flat-top dominance and Ninja's (TICKER:SN) Woodfire electric entry create indirect competition that erodes pellet grill category growth. If Traeger's 3.6% household penetration is a ceiling rather than a floor, the addressable market is far smaller than bulls assume. The asymmetry lies in Project Gravity's potential. If Phase 1 and 2 savings deliver $50 million annually while consumables growth continues, Traeger could generate $80-90 million in EBITDA on a $540-555 million revenue base, supporting the current enterprise value. However, if revenue declines accelerate beyond the guided 8-11% or if MEATER's drag worsens, EBITDA could fall below $50 million, making the debt load unsustainable. The stock's 0.21x price-to-sales ratio suggests the market is pricing in the latter scenario. ## Valuation Context: Distressed Pricing for a Distressed Business At $0.91 per share, Traeger's $124.8 million market capitalization and $545.2 million enterprise value value the business at 0.93x TTM revenue and approximately 7.5x-8.3x guided EBITDA. These multiples are depressed but not necessarily cheap. Revenue is declining 8-11% and margins are compressing, making forward multiples higher than trailing figures suggest. Comparing to Middleby's (TICKER:MIDD) Residential segment (which includes Camp Chef) provides context. Middleby (TICKER:MIDD) trades at 1.54x sales and 9.91x EBITDA with positive growth and 16.4% operating margins. Traeger's discount to Middleby reflects its negative operating margin (-1.94% TTM), declining revenue, and higher risk profile. The EV/Revenue multiple of 0.93x is appropriate for a business with 40% gross margins and negative operating leverage. The balance sheet metrics tell a more concerning story. Debt-to-equity of 2.30x is high for a consumer discretionary company, and the current ratio of 2.96x is inflated by tariff-driven inventory buildup. The quick ratio of 1.23x provides a better liquidity picture, but $115 million in inventory represents approximately 21% of guided revenue—an inefficient use of capital when cash is scarce. Positive free cash flow of $11.9 million TTM and $6.39 million quarterly suggests the business can self-fund operations, but this is after working capital changes that may not be sustainable. The price-to-free-cash-flow ratio of 28.3x is not meaningful for a distressed equity, and the negative return on equity (-45.04%) reflects the goodwill impairment and accumulated losses. The valuation question is not whether Traeger is cheap, but whether it can survive to earn a normal multiple. If Project Gravity delivers $50 million in savings and revenue stabilizes, a 1.5x revenue multiple on $550 million would imply an $825 million enterprise value, nearly 50% upside. If revenue continues declining and margins compress further, the equity could be worthless in a restructuring. The market's $0.91 price splits the difference, pricing in moderate probability of success but demanding execution perfection. ## Conclusion: A Premium Brand Fighting for Its Life Traeger's investment thesis is no longer about category leadership or household penetration growth; it's about whether a 38-year-old brand can surgically restructure its cost base and supply chain fast enough to survive a tariff war and consumer recession. Project Gravity's $50 million savings target is credible and necessary, but the $60 million revenue sacrifice and 18-month implementation timeline create a race against time, liquidity, and competitive share loss. The core tension is this: Traeger's premium brand and consumables flywheel remain valuable assets, as evidenced by Woodridge's success and pellet growth, but the company's cost structure and China dependency were built for a different era. The MEATER impairment proves that brand extension is not automatic, while the gross margin collapse shows tariffs can overwhelm pricing power. Management's guidance implies confidence that the business can be stabilized at $540-555 million revenue and 12-13% EBITDA margins, but the stock price suggests investors need proof, not promises. The two variables that will decide this thesis are execution velocity and consumer resilience. If Vietnam diversification accelerates beyond the 2026 target and MEATER's integration yields unexpected wholesale growth, margins could inflect faster than expected. If the replacement cycle materializes and Traeger's price increases hold, revenue stabilization could support the debt load. But if competitors gain permanent share in the sub-$1,000 segment or if tariffs increase further, the operational leverage works in reverse, and the equity becomes an option on asset value rather than a going concern. For investors, Traeger is a high-risk, high-reward turnaround story where the reward is survival and a return to normal multiples, and the risk is permanent capital loss. The $0.91 price reflects a market that has stopped giving credit for brand history and demands demonstrated cash flow generation. Project Gravity must deliver not just savings, but a fundamentally more efficient business model—one that can thrive, not just survive, in a world where premium positioning and cost competitiveness are no longer mutually exclusive.